Invest1 publisher3 min readPublished
Seoul permit filings show September apartment deals holding at August's depressed level
Seoul apartment sales fell to 3,466 in August, less than half the monthly pace of April and May. Agents say loan limits of 100 million to 200 million won leave the market to buyers who can pay mostly in cash.
The Investor · Invest desk
What happened
- Land transaction permit filings, a leading indicator of deals, fell 65.1% to 3,547 in August from 10,165 in April, according to the Saeol portal.
- Filings in Gangnam's three districts, where lending curbs and the tax overhaul weigh hardest, fell 70.1% from April.
- An 84-square-meter Gaepo Xi Presidence flat first listed at 4 billion won sold in early September for 3.47 billion won, according to local brokerages.
- The government extended the owner-occupancy grace period for tenanted homes in permit zones through the end of next year, effective next month.
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Why it matters
- constraint Each tenanted flat the extension brings to market needs a buyer who can repay most of the jeonse deposit from savings, so new listings can outrun new deals.
- cost Gangnam owners who have to sell are absorbing the slump through markdowns in the hundreds of millions of won, because loan limits shrink their buyer pool to cash holders.
- decision Owners of tenanted flats in permit zones now choose between selling into a mostly cash buyer pool at a discount and holding for a change in rates or loan rules.
- exposure The outer districts still trading rely partly on renters switching to purchases, and loan-dependent buyers there cannot chase prices as rates rise, so Nowon-area volume is exposed to each further rate move.
Permit filings lead reported deals in Seoul [5], and in August the two counts nearly matched: 3,547 filings against 3,466 deals [1]. September filings stood at 3,853 late in the month [6], about 8.6% above August [1]. The 1,387 September deals reported so far will rise as contracts are registered within the 30-day window [3]. If August's ratio of deals to filings holds, the month finishes near 3,770 [2], against more than 8,000 in each of April and May [2].
Seoul Economic Daily's report puts the slump down to lending curbs, rising rates, a tax overhaul and this year's price run-up [4]. It also reports that few expect volumes to return to where they stood before the capital gains tax surcharge grace period expired [15].
The deals that remain are in the cheaper outer districts. Nowon, Gangseo, Eunpyeong, Dobong and Guro filed 1,430 of September's permits between them [7], 37% of the city total [3]. Agents there say demand has cooled after a fast rise in prices [16]. An agent near the Sanggye Jugong 11 complex in Nowon said: "A home that used to go for 500 million won is now asking 700 million won, so it is uncomfortable even to broker it. Prices have climbed more than 30% in five months while rates are rising, so people are not stretching themselves." [13] That asking price is 40% above the old one [4].
In Gangnam the adjustment is coming through price. Filings in the three Gangnam districts fell 70.1% from April [8]. At Gaepo Xi Presidence, the 3.47 billion won sale closed 530 million won, or about 13%, below the original listing [5]. An agent near the complex said: "Buyers with cash can pick up distressed listings at discounts of 500 million to 600 million won or more. Even when a distressed listing comes out, only 200 million won in loans is available, so no one is willing to commit." [10] At that limit, a buyer paying 3.47 billion won for the Gaepo flat would need about 3.27 billion won of their own money, or 94% of the price [6].
The extended owner-occupancy grace period takes effect next month [11]. A non-homeowner who buys a flat with a sitting tenant can wait until the tenant's renewed lease ends before moving in, and the report expects that to bring out listings that occupancy rules had made hard to sell [11]. The measure changes when a buyer has to move in. The report describes no change to how much a buyer can borrow, and borrowing is the limit agents cite. An agent in Nowon said: "For listings with a sitting tenant, loans to repay the jeonse deposit (a lump-sum, interest-free rent deposit) are capped at 100 million won, so realistically only buyers with a lot of cash can purchase. The impact on transaction volumes will not be large." [12]
Two things could lift volume faster than I expect. Renters in outer Seoul who cannot find jeonse flats may buy instead, and Yang Ji-young, a specialist at Shinhan Premier Pathfinder, said: "In outlying Seoul, jeonse listings are hard to find, so some of that demand is shifting to purchases, but with rates rising, buyers who depend heavily on loans cannot chase prices higher." [14] Gangnam discounts could also grow large enough to draw cash buyers in numbers [10]. I think both show up in prices before they show up in counts. Filings and deals ran close in August, so the permit series after the extension starts is the check: matching July's 5,465 deals [1] would take monthly filings about 42% above September's 3,853 [7].
What to watch
- Seoul land-permit filings for October, the first month under the extended owner-occupancy grace period; a count near 5,500 would contradict the view that loan limits cap volume.
- The final September deal count after the 30-day reporting window closes, set against the 3,853 permits filed.
- Further Gangnam sales closing hundreds of millions of won below listing, as at Gaepo Xi Presidence, or any change to the loan limits agents cite.